Natural Justice Violation: Delhi HC Remands Ex-Parte GST Adjudication With Safeguards

Neelmani Electricals challenged an ex-parte GST adjudication order dated 05.04.2024 for AY 2018-19, passed pursuant to a show cause notice dated 16.12.2023. The order raised tax, interest, and penalty demands and was followed by provisional attachment and debit freeze of the petitioner’s bank accounts under Form GST DRC-22. The petitioner also questioned the validity of Notifications No. 9/2023 and 56/2023 issued under Section 168A of the CGST/SGST Acts extending the limitation.

It was undisputed that the petitioner had neither filed a reply to the show cause notice nor appeared for a personal hearing and approached the Court only after bank accounts were frozen.

Main Issue: Whether an ex-parte adjudication order passed without an effective opportunity for a hearing should be set aside and remanded.

HC’s Order: The High Court held that the adjudication order violated principles of natural justice and set it aside, remanding the matter for fresh consideration. The remand was made conditional upon the deposit of Rs. 10,000 as costs with the High Court Clerks Welfare Fund and maintenance of a 25% balance in each attached bank account, upon which the debit freeze was directed to be lifted.

The petitioner was granted time till 31.01.2026 to file a reply to the show cause notice, followed by a personal hearing and a fresh reasoned order. The Court clarified that all issues concerning the validity of the Section 168A notifications were kept open and made subject to the outcome of proceedings pending before the Supreme Court.

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